Why Build Your Own Community Currency System? • P.Greenman, M.Fee \

by Greenman and Mary Fee

A Local Exchange Trading System (LETS) is a community-owned and run currency system based on a zero-sum model, as opposed to monetary systems in which the money-suppliers continuously add interest, thereby increasing the money supply. Each member's account is usually set to start at zero; in order to trade on average half the accounts will be "in commitment” but with no interest being charged or earned at either end.

The zero-sum system enables members who engage in mutual exchange activities to record the value of that exchange, as a simultaneous plus and minus in each other's accounts. Historically, some LETS groups keep manual ledgers, others use stand alone database systems to carry out these transactions. The next generation of networked community currency systems is changing the scene, immensely.

During Wsfii, a local currency was used to manage internal accounting between organisers, and provide attendees with food tokens redeemable in the local shops. The “Lime” (short for Limehouse in London, where Wsfii was held) was not a LETS system proper, but an Event Currency only usable within a discrete period of time. This seemed like excellent way of bootstrapping what could become a fully-developed local currency, because it established with local traders the idea that Limes are real, they equate to the mainstream currency, and they work for all. Once confidence is established, it becomes possible to take the currency “virtual”; so traders would not necessarily feel the need to cash out in sterling, but could keep a balance on their Limes account.

An ideal scenario: perhaps they need some help to serve behind the counter. They could connect to a local information portal and consult a directory to find someone willing to do this kind of work in exchange for Limes, which are redeemable in other local shops. This scenario may be some way into the future, but the Limes experience at Wsfii laid a good foundation for proving the concept could work.

Why would you want to set up a local exchange trading system? Motivations of people joining a currency community could vary from needing help and being short of cash to having time on their hands and wanting to help but not really feeling they could afford to volunteer. Some people worry about the actions of the mainstream banking system, which is grounded in two things: control of the mechanism for credit creation, and control of public confidence. Many also wonder if there's a way to “open-source” the things people need from central banking systems.

Talking at Wsfii, as the coordinator of LETS link UK, I suggested that no project is more worthwhile than this to devote your energy to if you are concerned about world poverty and the monetary system which engineers it. You can protest about it, try to mitigate it or try to change the paradigm which makes it work. LETSLink is making a real effort now to bring together the people who are working on open source community currency software systems and thinking about making them work in the world.

http://www.letslinkuk.net/members/software.htm - list of LETS and CC software in progress.

http://copsewood.net/mailman/listinfo/mrsdev - Richard Kay's email discussion list for CC software projects.

-- Mary Fee

Wsfii had an event currency called the “Lime” (short for Limehouse in London, where the event was based). The “Special Edition” Lime was valid for one week, 26 September - 2 October 2005. This edition was little more than a voucher, it was backed one-to-one by real cash, and any vendor participating in the project had any Lime notes exchanged for Pounds on a regular basis.

The currency was a “scrip”, a printed note issued in 3 denominations; two Limes, one Lime and half Lime. Notes were printed onto green paper and a red stamp used as a simple counterfeit prevention mechanism.

Involving Local Businesses
We described the Lime to local businesses as “Food Tokens”. Delegates to our conference would be given tokens which they would use to exchange for food. We gave each business about £50 as a deposit and asked them to accept 50 Limes worth of business. When the £50 was used up, we would pay them a visit and hand over more money. We mentioned that, if they were happy to accept more Limes than they had deposit for, we would reimburse them for those too.
Stores were given an information sheet on how the “food tokens” worked, as well as a small “Limes Accepted Here” sign to post in their window.

Issuing The Currency
To manage our accounting, and to ensure that the currency was fully backed, we “sold” Limes to core WSFII participants. These backers had funding budgets allocated for food catering in the week leading up to the event. The first run of 500 Limes was sold for £500 and this money was used to pay deposits in the participating stores. The core backers were then able to distribute the Limes to members from their teams, who could spend the money as they desired. A few more runs totalling about 500 Limes were printed in the week leading up to the event.

Once the event began, we used the takings on the door to back the currency. Half of the entrance fee, £10 on day one or £5 on day two, were converted into Limes and returned to the delegate. For concession entrance, we charged £5 entrance and handed it all back in Limes. The rest of the entrance fee was used to back the Limes handed out to conference speakers. In total, we issued a little over £2000 in Limes.

Managing the Economy
Once a level of trust had been established, managing the currency became a matter of visiting participating stores once every day or two to keep our credit rating up. The store owners were all very happy to have participated and we discovered the major benefit of owning all the money – we did not need to pay for anything!

-- Greenman